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2001 Fall Bulletin

SALES TAX HIKE TO COST $400 PER HOUSEHOLD

HOUSEHOLD SALES TAX WOULD BECOME $2200 PER YEAR WOULD HAVE MINOR IMPACT ON ROADS AND SCHOOLS.....More well-kept secrets

The Fairfax County Chamber of Commerce and almost
all candidates, Republican and Democrat, support a referendum asking
Northern Virginia voters if they would be willing to raise the sales
tax from 4.5 cents to 5.5 cents on the dollar for school and
transportation construction.

Chief among the referendum supporters is Democrat gubernatorial
candidate, Mark R. Warner, whose transportation plan depends on the
sales tax increase but who also says that he does not know whether or
not he supports the sales tax increase.

However, there are two things that the tax
referendum supporters are not talking about. They do not say how much
the 20 percent increase in the sales tax would cost the typical
household, and they do not acknowledge what little impact the tax hike
would have on schools and transportation.

Sales Tax History

Today's
4.5 cent sales tax was first enacted in 1966, with a two-step phase-in.
The sales tax began at two percent in 1967 and increased to three
percent in 1968. At the same time, local governments were authorized to
implement a one-cent "local option" sales tax, where the proceeds would
go to the local government. That brought the tax up to 4 cents.

In 1986, then-governor, Democrat Gerald L. Baliles, increased the sales tax by a half-penny for transportation.

$1800 per household today

According to the Fairfax County FY2002
Adopted Budget Overview, the one-cent local option sales tax generates
for the county $145 million tax revenue per year. The budget Overview
also states that sales tax paid by a typical household is $397.59 or
nearly $400.

If one cent of sales tax costs the typical
household $400 per year, and since the full sales tax is 4.5 cents, the
typical household is already paying nearly $1800 per year in sales tax.

This is in addition to property taxes and state
income taxes, which cost the typical household $3000 and $5000
respectively. The Taxpayers Alliance does not have an estimate of the
average gasoline, federal income, social security, medicare, cigarette,
and alcohol taxes and lottery proceeds paid by the typical household.

Washington Post estimate

In an October 15, 2001, article ("Transportation Proposals Split on Referendum") on the front page of the Washington Post
Metro section, an example was given that suggested that the sales tax
hike would cost only $84 per year. The amount however assumed a
half-cent tax increase. We do not know if Mark Warner's transportation
plan assumes a one-cent or half-cent sales tax increase because he does
not have his transportation plan posted on his campaign website.
However, the most prominent tax proposals in the state legislature this
year proposed a one-cent increase.

Moreover the Washington Post figure was
the amount paid by one person with an income of $100,000. In Fairfax
County the average household has 2.7 persons, and the average household
income is $90,000. When the Post's $84 dollars is adjusted for all these factors, it comes out to about $400 per household.

Mark Earley threatens a veto

In what was a pleasant surprise to
taxpayers, Republican gubernatorial candidate, Mark L. Earley, decided
to reinvigorate his languishing campaign by declaring that he would
veto a sales tax referendum. Rather than raise taxes, Mr. Earley's
transportation plan, which is posted on his campaign website, proposes reallocating one-third

of taxes on insurance premiums from the general
fund budget to transportation. While both Mr. Warner and Mr. Earley
rely too much on borrowing, which diverts a third of the revenue to
interest, Mr. Earley does move in the right direction by tapping into
general fund revenues instead of raising taxes.

Where the money is

In the following graph, the top line
shows the actual Virginia budget since 1979. The bottom line shows how
much the state budget needed to increase to keep up with population
growth and inflation. It shows that this year, the state budget has $8
billion more than was needed to keep up with inflation and population.

The following pie chart shows that NONE of the
extra $8 billion was allocated to transportation. Instead it went to
large increases in social spending, because as was explained in the
last FCTA Bulletin, state policy forbids the use of general fund
revenues for transportation.

The Washington Post article correctly
observed that neither candidate's plan comes close to adequately
funding transportation needs. Also, if the tax hike is shared with
schools, it may not be spent on buildings. An October 19 Fairfax Journal article states that the teachers' union wants the tax spent on salaries.

While schools are lavishly funded, transportation
needs a billion more dollars a year, not the $200 million that might be
raised from the sales tax increase.

If transportation had been allowed to have just
one-eighth of the $8 billion in general fund revenue increases, that
would have been five times more than what the sales tax hike would
provide.

The only way transportation can get the large
revenues it needs is to be allowed to compete with social spending for
state and county general fund revenues.

Despite a budget that has grown twice as fast as
enrollment and inflation, Fairfax County Public Schools SAT scores
continue to stagnate. The school system boasts that its average SAT
score is above the national average, but still does disclose that its
average SAT score is at the 63rd percentile.

Nor has the school system made any progress in
closing the gap between Whites' scores, which are at the 70th
percentile, and African-American scores, which are at the 35th
percentile. (In the graph above, there are two different values for
year 2000 ethnic SAT scores because the school system is changing the
procedure for computing the scores.)

SOL tests are not improving the SAT results. Most
Fairfax County high schools with SAT scores below the 50th percentile
have met the SOL accreditation standard (see accompanying table). SOL
passing scores are calibrated to correspond to "D" performance, since
the tests determine if a student graduates from high school, and "D" is
a passing grade. In a move that disappoints SOL supporters, the
Virginia Board of Education decided to give students SOL credit if they
get a score of at least 400 (out of a range of 200-800) on SAT II
subject tests. According to College Board statistics, nearly everyone
who takes an SAT II subject test gets a score of over 400.

This table shows SAT I (math plus
verbal) and Standards of Learning (SOL) test results for each Fairfax
County public high school. The table also shows the SAT percentile
corresponding to the school's average SAT score. For example, the
average SAT score of 1093 at South Lakes High School is at the 63rd
percentile, which is also the average for Fairfax County. This means
that the average South Lakes student scored higher than 63 percent of
the 1.2 million high school seniors who took the SAT I. The Fairfax County School Board does not publish SAT percentiles.
Each high school administers 10 or 11 SOL tests in English, math,
history, and science. The table shows the average percent of students
passing all tests and the number of tests failed. A school fails a test
if less than 70 percent of the students taking the test pass it. School
accreditation is based on SOL test results. "Provisional" means the
school is close to but still below the accreditation standard.

Fairfax County Public Schools 2001 High School Test Results

(In Descending Order by SAT Score)

High School

Average SAT Score

SAT Percentile

SOL Test Average Pass Rate

SOL Tests Failed

Accreditation Status

JEFFERSON

1456

98

100

0

Full

LANGLEY

1186

78

90

0

Full

WOODSON

1148

72

86

2

Full

MCLEAN

1136

70

87

1

Full

MADISON

1134

70

84

1

Full

W SPRINGFIELD

1111

66

88

1

Full

LAKE BRADDOCK

1108

66

88

0

Full

OAKTON

1102

64

83

2

Full

SOUTH LAKES

1093

63

73

2

Provisional

ROBINSON

1091

62

86

1

Full

CHANTILLY

1070

59

81

2

Full

CENTREVILLE

1069

59

87

1

Full

FAIRFAX

1068

59

82

2

Full

HERNDON

1061

57

83

2

Full

MARSHALL

1061

57

83

1

Full

WEST POTOMAC

1025

50

72

6

Provisional

STUART

1019

49

76

2

Full

HAYFIELD

1017

48

77

2

Full

ANNANDALE

1005

46

77

3

Full

FALLS CHURCH

1003

46

70

6

Provisional

LEE

986

43

78

4

Full

MOUNT VERNON

974

41

65

7

Provisional

EDISON

972

40

76

4

Full

FCPS

1093

63

VIRGINIA

1011

47

NATION

1020

49

Vote "NO" on school bond referendumExcessive use of bonds has eroded leverage

Passage
of the Fairfax County Public Schools $378 million school bond
referendum, which will be on the ballot Tuesday, November 6, would
perpetuate school overcrowding by rewarding the Fairfax County School
Board's fiscal irresponsibility.

Bonds are used for leverage, i.e., to generate a
quantity of cash that is much larger than the debt service payments.
Debt service is the periodic payment of interest and principal to pay
back the bond. However, Fairfax County has sold so many bonds that its annual debt service actually exceeds the revenues from bond sales! For example, in FY2001 the county sold $175M in bonds (of which $130M was for schools) but paid $185M in debt service. Since 1995, Fairfax County has spent $100M more on debt service than it has received from bond sales. That extra $100M could have built five new elementary schools.

Recurring
construction expenses should be paid for from the schools' operating
budget, which is $800 million more than is required to pay for
enrollment growth and inflation over the last 25 years. However, the
school board has arbitrarily declared that the operating budget is
off-limits to construction. The result is that while buildings are
neglected school staff has increased four times faster than enrollment,
producing no significant increase in academic achievement.

According to Fairfax County budget documents, the
Fairfax County Economic Development Authority (FCEDA) is an independent
authority with an FY2002 budget of $6,837,644 and 33 authorized
positions. The FCEDA's Mission is "to encourage and facilitate business
and capital attraction, retention, and development in Fairfax County;
to promote the County’s cultural, historical, and recreational
attractions to business travelers; and to attract business meetings,
conferences, and seminars to the County’s meeting facilities in order to expand the County’s nonresidential tax base" (emphasis added).

Note carefully the stated reason for its
existence -- to make more money available for the government to spend.
Citizens are supporting a government agency whose mission, in reality,
is to enlarge the government. In theory, increasing the business tax
base shifts some of the tax burden from residential property tax payers
to businesses. BUT, the absence of property tax reductions as the
proportion of the non-residential tax base grew to over 25% in the
1990s demonstrates that that argument is a sham. The only observable
result of this Authority's efforts from the residential taxpayers'
perspective has been increasing traffic congestion, shrinking green
space, rising home prices, and ever higher taxes on their residences to
sustain runaway county government growth.

Knowing the reason for its existence, it is clear
that the $7 million spent annually to feed the FCEDA would serve
residential property owners better by letting them keep and spend their
money. Let business growth occur naturally, without the FCEDA
subsidies. If the Authority's activities have true value in the
marketplace, let the beneficiaries, such as developers and the
hospitality industry, fund its functions, as has been done in the past
through Chamber of Commerce or Booster Club activities.

-Ludwig Benner

FCTA Annual Meeting

On Saturday, October 20, 27 members and friends
of the FCTA met for a luncheon at the Marco Polo Restaurant in Vienna.
The Alliance was pleased to have in attendance the Honorable Jack
Herrity, former chairman of the Fairfax County Board of Supervisors.

Connie Bedell, who helped lead FCTA opposition to
the 1992 meals tax referendum, was elected first Vice President. Lou
DiLeonardo, Elizabeth Smith, Ray Coggin, Warren Hill, and Al Marcy were
re-elected as District Directors.

Peter Ferrara, president of the Coalition of
Virginia Taxpayers and FCTA at-large board member, spoke on an action
plan for fighting the sales tax increase. He asked for committees to
contact anti-tax businesses for money; organize events, especially
debates; coordinate with Arlington, Loudoun, and Prince William tax
watchdog groups; and advocate state legislation to cap spending and cut
income taxes. While Virginia is talking about raising taxes, other
states, he said, have dramatically reduced income taxes by limiting
state spending growth to the rate of inflation and population growth.
Studies of state policies show that the states that cut taxes have
economies that grow the fastest.

Have you renewed your membership for 2003? Please renew if the date on your mailing label is before November 1, 2003.

The Taxpayers Alliance supports
lower taxes, less spending, and restrained borrowing by our government
as well as citizen participation in government through initiative,
referendum and recall. We testify at public hearings, disseminate
voting records of elected officials, write 'op-ed' articles and letters
to newspaper editors, provide speakers to civic groups and analyze and
disseminate information on budgets, taxes and borrowing.

We need volunteers and dues-paying members.
We would like to hear from you. Please take the time now to return this
membership form along with your dues and a contribution. We thank you
for your past and continued support.

_____Please enroll me as a new member of the Taxpayers Alliance ($15 per family for 12 months)

_____Please renew my membership in FCTA (dues $15 per family for 12 months)

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